Nov 21, 2012 7:00pm EST
>>> i like to say there is always a bull market somewhere. i promise to try to find >>> good evening everyone, i'm larry kudlow. this is the kudlow report. not so fast, everyone. perhaps that was very premature about the fiscal cliff. we still see little or no movement on a deal. president obama might want higher rates and cap on reductions for more tax revenues. that could be a deal-breaker and the markets won't stand for long while nothing gets wrong. i don't want to be overly pessimistic. i'm trying to be realistic. i'm reporting what i'm hearing. but stocks did rise a bit on news after cease-fire between israel and whhamas. is israel snaf particularly when we know that palestinians and gaza may just rest unand rearm for the next round? >>> finally as you head out into the thanksgiving traffic, ask yourself where president obama still hasn't given the green light to the keystone pipeline that would give us jobs and energy n independence? now a truly bipartisan group of senators is telling the president to make a decision right now. first up this evening, this is the big question. will we get a deal done or might president obama just let us go right over the fiscal cliff, take the recession, and simply blame the gop? this is a serious question that i'm hearing from washington all the time. so let's talk. we have cnbc contributor jack bernstein, former chief economist, and art laffer, former reagan adviser. i'm not attacking obama or anything. i'm just saying there is a lot of talk of stalemate. well perhaps go through where, why and how. staffs have been meeting unsuccessfully. some people are saying, art, that the scenario is going to be that president finally throws up his hands and says there is no deal, we're going to have a stalemate and we will tall off the fiscal cliff into recession and then he will blame the republicans. what's your take? >> i think he's going to blame the republicans, larry, for sure. and i think in the republican's interest to delay it as long as possible and make the republicans look as uncooperative as possible. but we will fall off the cliff anyway, larry. and i think we will have a very bad year in 2013, even if they do extend all of the tax cuts. i think we have a real bad scenario coming forward. >> jared bernstein, what do you think that the president might go off the cliff. okay, nothing on your end. then blame the republicans. and add one thing, jared, president obama does have a legacy. seems to me that part of that legacy is, you know, better fiscal position and better economic position. that's why i'm a little skeptical of this scenario but i want your take on it. >> yeah. i share your skepticism, look. if we do go over the cliff, and i sure hope we don't, remember, it is going over and staying over that's recessionary. if there's a real deal that could show markets that we could actually get in a sustainable budget path, even if that deal isn't signed and stamped by december 31, a short trip over the cliff won't hurt us. but here is the thing for you and art to consider. >> i disagree, by the way. >> on thanksgiving eve, here's the thing i want you to consider. repeat after me, guys. tax rates are going to go up on the top 2% of households and it's not going to hurt the economy one bit. >> oh, that part i won't -- >> it's got to be part of the deal. >> that's part of the deal. >> before you answer that, art, i want to say, a second issue. let's put it right on table since jared opened up. many people believe since the president's budget want $1.6 trillion -- $1.6 trillion, of revenues, over ten years. >> over the next ten years, to be clear. >> next ten years. he will wish to raise the top tax rates. that includes income taxes, cap gains, dividends and estate taxes. and art laffer, he will also wish to curb deductions so he will raise tax revenues as well as tax rates and art, that sets the stage for a stalemate politically. what does it do economically also? >> well, it does set the stage politically. by not doing anything, all the tax rates go up on everyone. that's for sure. so, the question is, the republicans will pass a bill that extends all the tax cuts. i mean, that they will go along with no problem. they won't go along with a double wammy and they shouldn't. this is obama's economy. this is obama's issue. if obama wants it pass that in the house, he has it find a group of republicans that will peel off from the rest of the republicans and good along with the democrats it pass this other stuff. but otherwise, i don't see any incentive in the president's part to not extend a large portion of the tax cuts if he can. i don't think he ever wants it see the whole thing go over the cliff. >> i mean, you have to remember that he does -- as you guys have both suggested, he does want to extend a large portion of the tax cuts. that's 98% of them. it's the top 2% of house holds, that not only he, but a majority of the lek electorate and and the polls, and a nonpartisan poll keeper says in the 2013 if the top two rates expire, we are talking about a tenth of a percent on gdp. isn't that worth the cost of getting on a bitter budget path, guys? work with me here. >> jared, come on, help me here. these people you are raising taxes on are job creators. this is the worst group you could raise tax rates on. honestly -- >> here is the thing that the -- >> simpson bowls, by the way. >> by the way, they assume the top 2% tax. >> and lowers the rates. >> how do you explain the -- >> simpson bowls would bring down rates. >> better markets, better incomes and with the older tax bracket. >> we are not going to have -- art, you answered it. one of the things that bothers me the most, art, is remember, we have the obama care tax hike. so we have capital gains rising. we have estate taxes rising. cost of investment will rise. the return on investment will fall. now, art, through the years, you have taught me that that means less business formation, lower productivity, worst jobs, and lower wages. how can that be a good thing? >> it's not. you can't tax an economy into prosperity, larry. and by the way, did you see what california has done? do you know what after tax rate of return on assets held in california is happened? it just plummeted. that's a very large share of the u.s. economy. we're noncompetitive in the world and we will have a real serious recession in 2013 unless something is really done quickly. >> jared, i just want to ask you a question. >> sure. >> you hinted -- this is really important. where we are going tonight is more politics than economics. >> okay. >> you kind of hinted that we might cross through the year, that we might fall off the cliff. if only for a short period of time. now as someone who worked in there years ago as arthur did, short period of time, you will take the better part of the winterer to make a deal. so we are going to go into recession. the question is, do you think the president can take that and do you think he can really blame republicans? is it that easy, or is all hell going to break loose in the country? >> i think it will be absolutely terrible if we go over and stay over the cliff long enough for recession. i don't care who blames whom but i will blame everybody up there. this economy actually has a little bit of momentum behind it and we would be crazy to kill that. obama says they would blame republicans so probably the white house is thinking about that. but if we have a deal by mid january, mid february, i don't see why that is going out of the question at all. they agree with most of what is on paper here. >> one quick thing. >> okay, sure. >> i don't think dividends will go up to 40%. i think there has to be some compromise. >> art, you get the last word. >> let me say, that people already moved a lot of income forward. there's income shifting as well as lower growth and that income shifting is going to drop gdp by a percent and half to 2% in the first half of 2013. that's baked into the cake already. >> over a hundred large companies have already brought forward their special dividend payments to avoid that tax hike. anyway, i got a job. jared bernstein, art laffer, have a happy thanksgiving. >> happy thanksgiving, everybody. >> you too, guys. >> well, here is a very interesting idea, carving out small business owners from the deadly fiscal cliff tax hikes. here now to tell us more is maine senator susan collins. as always, whenever you come on this show, you have something really interesting to tell us. i'm reading about this carve-out for small businesses you are kind of looking after. tell us more, how does this work? >> what i wanted to do was to try to forth a middle ground that protected small businesses from any of the rate hikes that are being discussed. it seems to me that democrats have been focussing mainly on increasing taxes, republicans were focussing mainly on the need to protect small business. and that there was a way to accomplish a middle ground by allowing for a sir tax on the very wealthy, those making over a million dollars a year. but not applying it to small businesses. many of whom paid taxes through the individual income tax system. >> right. that's a key point. all right, i'm going it leave the sir tax alone. i just want to focus, you basically keep small business top rated 35%, and i wanted to ask you, are there any restrictions. we are talking sub chapter llcs, et cetera, et cetera. are there any restrictions to that, or is it just everybody? >> there are restrictions. first of all, it would require that small business actually have employees. that's the whole point is to protect the job creators in our society. second, it would apply to businesses that had up to 500 employees. so we're not talking about very large sub chaptersing corporations so most of them are smaller. and it is really focused on protecting those businesses, such as those that employ between 20 and a hundred employees who are employing 18 million americans. in addition, there's another very important distinction. the protection the carve-out would apply to small businesses whose owners are actively involved in running the business, not just passive investors. so that's the kind of business that we're trying to protect. >> those are the job creators, i think, basically you captured most of the job creators. now, i want to circle back just for a second. you mentioned a sir tax on millionaires. do you see a sir tax on millionaires as part of a fiscal cliff compromise, senator? >> i do. i think ultimately that's where we're going to end up. we've got to look at both sides of the ledger. but my concern is that in imposing this kind of sir tax or higher tax on people who make more than a million dollars, that we don't head our small business sector, it is small businesses that are creating the vast majority of new jobs in this country, and sustaining the jobs that we have. and the last thing they need is to be hit with additional taxes. so that's the whole concept behind this proposed -- >> i think it is great job protection for the proposers. no one really knows, we don't know if it is stalemate, solution or who, what, when, why. there were bad stories in the paper today that staffs weren't getting along. but when you mention the millionaire sir tax, do you think that's it? ? other words, would the millionaire sir tax cover that and would the john baner idea of putting a limit on tax deducks work also? so have you a revenue but a compromise on tax rates? >> i think that t it would work. and it would give us time to do a complete overhaul of the tax code, which is what i know you've talked about on your show many times. and it really is what is needed. but we're not going to be able to do that before january 2nd, before we go over that fiscal cliff. so we need a balanced plan that addresses spending as well. but i think john boehner's proposal plus the proposal i put forth last fall, for the sir tax, but with the carve-out for small business, offers a way forward. and would help prevent us from speeding over that fiscal cliff, which would be a disaster for our economy. >> all right, well, that's it. i think you're rate about that. maine senator, susan collins, can't thank you enough. have a very happy thanksgiving. >> thank you, larry. >> all right. stock markets of course are still obsessed with the fiscal cliff. market did go up today by 48 points on the dow. you know, it is as though nothing else exists. so we're about to talk to a market pro who's going to help you with therapy on this market obsession. speaking of therapy, don't forget, folks, free market capitalism is the best bet to prosperity. this whole fiscal cliff issue is tied up with economic freedom and prosperity. i'm larry kudlow, we'll be right back. 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[ a i'm with scottrade. cliff, that's what we need. >> hey, washington, even santa claus is calling for a fiscal cliff deal. but it depends on the kind of deal. certainly investors are obsessing over the entire fiscal cliff subject. our next guess will help us with this therapy. welcome back it tjm institutionaler is visions. i want it ask you, let's run the table on this, jimmy. first of all, if there is a stalemate and no year by year end and jared bernstein in the first segment suggested that that might happen. then, does the stock market really start selling off big time, let's say, in december or the last two weeks of the year? what happened? >> i don't know if big time is the right way to describe it. i could see them losing a hundred handles relatively quickly, down to 1250-ish. i think we would see a quick response from the fed. we know where they stand on this. they want to provide liquidity and any time they see a need for that. i've never uttered these words before, but santa claus is wrong. we don't want a deal on the fiscal cliff, we want a good deal on the fiscal cliff. >> right. now this is really key. first of all, i want it say one thing, regarding ben bernanke and his monetary safety net and he did say yesterday that he didn't think monetary policy could offset a fiscal cliff recession. i don't want to get into a lot of fed watching. i'm just saying, i'm not sure the federal reserve will do much more. maybe they will, maybe they won't. now regarding good deals versus bad deals, this is where i disagree with some of think kol a colleagues here. maybe you do too. if this is deal that jacks up tax rates, the capital gains rate, dividend rate, if it has a millionaire surtax as senator collins said, that's not such a hot deal. how would they react to a high tax on investor type of deal. >> they limit investments. they make investments less attractive. the stock market doesn't want a big raise on capital gains and dividends. the stock market is okay with a small one. the best is the 39% ordinary income tax hike. but essentially leave dividends and capital gains alone with only a tiny bit of increase in that. >> but that is not going to happen, my friend. it's not going to happen. >> this is a grade in scale on the possibility. that's the best side. >> i'm just saying, you're here to give us therapy. >> okay. >> john boehner doesn't want them to. john boehner says let's put a lid on loop holes and raise revenues that way. some people, including myself, believe the president wants it raise revenues by loophole closures but also raise tax rates. wasn't both. if he goes the tax rates, jim, you're talking about capital gains going from 15 to 24, including obama care tax. and you're talking about dividends going 15 to about 44. now maybe they will fix that dividend thing. but there is no question that the incentives will roll back by 10 or 15% on those two investment tax rates. no question. >> but if the dividends are fixed, did you say 25% on capital gains, i think the market will learn it live with that. if we can rework the dividend part, the market may think that is positive and think that's a risk -- >> so you might have a shock initially. but then the market will absorb the new tax rates, is that what you are saying? >> that's what i believe, certainly. then you get back into things like apple. if they raise capital gains and dividends and raise dividends up to 40% like on ordinary income, then i see this sluggish recovery, the market will interpret as that, then you run into things like coca-cola, proctor and gamble, things reviewed as safe havens, because we won't have a very good economy. >> if we don't get it done by year-end, good over the cliff, and into first quarter recession, art laffer thinks there is recession baked into the cake for first and second quarter. cbo says go over the cliff, we will have recession. that's bad for growth, bad for gdp and bad for profit. you have to expect another correction that might go well into the winter. >> absolutely. they make it out that it is not a big deal if we go over the fiscal cliff. but if there is a tremendous amount of uncertainty, the stock market can sell off and selling begets selling and that's a tremendous danger to wealth. many of them believe it is only up on air at this point, anyway. so i think that's an awful deal. >> we just -- i don't know. i think you got to keep your powder dry right now. i just think you have to wait and see what the reports are, what comes out of press, what spokes people say, we just don't know. but there is no question stocks are obsessing about the fiscal cliff. jim, have a great thanksgiving. >> you too, larry. >> thanks for coming on tonight. >> 18,000 lost jobs as hostess goes into liquidation. but the fat cats will not lose any money. wait until you hear the money they are making even as their members suffer. twins. i didn't see them coming. i have obligations. cute obligations, but obligations. i need to rethink the core of my portfolio. what i really need is sleep. introducing the ishares core, building blocks for the heart of your portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. >>> so the bankruptcy court approved hostess brands liquidation plan late this afternoon. the firm may still soon several brands but 15,000 workers are being terminated now. while the bakers union and families suffer, the leaders are coming out like financial band its. get this, union president frank hz pay is up and while the union lost 50% of membership. compensation, 45% rise from 182,000 in year 2000 to 262,654 in 2011. and that, according to the department of labor. now, the leaders pensions, they are a hundred percent funded and paid for by the union members. and in addition to the six-figure salaries paid it union's executive staff, both hurts and his secretary treasurer have their kids working at headquarters pulling down over 71,000 and about 49,000 respectively. i think that's called nepotism. now hostess isn't our only labor problem. but i hope you consider how the leadership hosed over the membership. but today, we've also got the seiu. they went ahead, snarling traffic at los angeles international airport, in the middle of the thanksgiving day rush. but you know what? airport employees say they don't even support the seiu. so what is up with this? we are going to ask the seiu president live a little later, who exactly she's prep accidenting. and a cease-fire in the middle east, but questions still abound. will it hold? did israel get the short end of the stick in my own take, israel should have gone ahead and finished the job of pummeling the hamas terrorists. that's next up on kudlow. [ male announcer ] if you suffer from heartburn 2 or more days a week, why use temporary treatments when you can prevent the acid that's causing it with prevacid24hr. with one pill prevacid24hr works at the source to prevent the acid that causes frequent heartburn all day and all night. and with new prevacid24hr perks, you can earn rewards from dinner deals to music downloads for purchasing prevacid24hr. prevent acid all day and all night for 24 hours with prevacid24hr. >>> welcome back to the kudlow report. i'm larry kudlow. in this half hour, how can anyone not be in favor of completing the keystone pipeline. nine democrats and nine republicans want the president to authorize construction right now. but alas, we will debate it. the seiu union is snarling $1.79 passengers going through lax this thanksgiving. turns out, the employees they say they represent don't want a thing to do with them. what a story of outside agitators. that's all it is. now a cease-fire between israel and gaza went into feekt today after eight days of heighten et violence. gaza is celebrating when the cease-fire was announced but at least 12 rockets have been fired into israel since the so-called truce. so is this deal bad for israel and good for the terrorists? let's get right to our distinguished guests. former deputy assistant of defense peter brooks and we welcome back wes clark former nato ally commander and fellow senior at ucla berko center. a serious question, do you think israel got done what it needed to get done in terms of taking out the hamas military installations and the rocket installations? did they get the job done? >> it is too early to know, but they sure hit a lot of targets in there, and you have to believe that targets were appropriate targets. they were plotted, picked up through various means of intelligence, and they had adequate time to strike them. the question is, did they do enough? we don't know that. the ground campaign remains an option. the troops are still there and as prime minister nettena hugh said, he cannot and will not allow the terrorists to rearm. >> interesting petoint, peter p you say ground war, if hamas doesn't round up the truce, it still can happen. >> it can still happen. >> you're the only one saying truce may not happen. now, peter, this is something, a quote from secretary of state hillary clinton today. she is in egypt. she says with president marcy. egypt assumed responsibility and leadership for the peace. peter brooks, i guess i might like it believe that. but with marcy and the muslim brotherhood behind them, they favor hamas. they hate israel. how can he possibly preside over real truce? >> that's a very good question, larry. i mean, president morecy is being tested. we will see if he rises to the occasion. don't forget he has the camp david acords with israel and he gets a lot of aid. egypt gets a lot of aid, economic and military aid for the united states with a peace treaty with israel. if they move away with that, that's in jeopardy. this new president is untested. it is a new government. if he is not able to provide for the country of egypt, things may change. he has been put on the spot, and he will have to perform. >> one more spot, peter. his foreign ministry and his morn minister and prime minister have said good things about hamas and bad things about israel. pardon my skepticism. >> yeah, of course, you are right to be skeptical. we've got to see where the rhetoric and deeds match up, don't we? that's what we have to see. i think the general is right. we have to see what happens in the days ahead. earlier today was five rockets. now 12 rockets. israelis have to respond. i mean, this is a cease-fire. the devil is in the details. the negotiating starts now with the cease-fire. the hamas and palestinians want things out of this. so do the israelis. i'm not saying we are out of the woods on this at all and i think we could see more conflict. >> a very smart move, larry, to put the egyptians in the position where as president morsi says, he is in charge. okay, he's got to be responsible. no more rhetoric. no more siding with one side. he's got to make the thing work. that's what we want to see as responsible leadership. not id logical leadership. >> that's a great point. let me ask you, something unresolved, in this peace treaty or truce, is the issue of gaza and its borders, which borders up into egypt. now the hamas, they want israel to pull the military out. and have a complete opening of the borders. into egypt. general clark, doesn't that open the door, if that ever happened, to iranians rearming, rearming three egypt, through the sinai, rearming hamas just like they always do. >> of course, and israel can't permit that and shouldn't permit that. this is where egypt has to step up and say, we will insure that no weapons get back into gaza. that has to be worked out in stages and demonstrated. it has to be checked and verified. and israel has a continuing interest and should have a continuing right to verify that. >> do you think, general, serious, do you think that hamas, i hope i'm not being too cynical, but hamas in some sense, gained a public relations victory? is that possible? and when you talk about egypt, egypt helped them gain a public relations victory? that kind of burns the back of my neck, general. but that's kind of the way i see it. >> obviously, they are going to say they gained a victory. i think the real loser is the palestinian authority and who has been sidelined by the hamas. a, they wanted to go after the palestinian authority and show they were powerless. they did do that. and secondly, to get egypt to come out and back hamas, which egypt hasn't done. so, at best, hamas got a partial victory and egypt has it think about its relationship with the palestinian authority and how to restore balance there. >> peter brooks, last 30 seconds. how does benjamin nettena hugh come out of this? >> i think the bigger question here is the middle east. i mean within you know, step back from what we were just talking about. look at syria. look at issues there. look at spill-over from syria. the administration has to get their arms around this problems in the middle east. and their policies right now are failing. this is just one small section of it. iran's nuclear program, we need a lot of attention on this and it just got's dressed. >> iran is the key point. wes clark, happy thanksgiving. peter brooks, like wise. >> same to you. >>> folks, we know president obama loves green energy. but his bets haven't paid off. some senators on his side of the aisle are seeing the light when it come to the keystone pipeline. are they right and will the pressure finally pay off? when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this. asking obama to okay the keystone pipeline. so mr. president, what is the hold-up? here is tyson cloak yum, director of energy program at public citizen. and ken green, resident scholar at aei. tyson, i'm stunned to see your notes you haven't come around to the easiest policy position regarding jobs, regarding energy independence. regarding more refineryes. how can you not be wildly in favor of the keystone pipeline? >> because the keystone pipeline has nothing to do with american energy security or lower gas prices for americans. it is all about what is good for canada. it is getting land-locked canadian crude out of alberta and to a coast. 75% of the record -- >> canada is an ally? where is that bad? first of all, oil is oil, right? oil is oil. it helps them, it helps us. jobs are jobs. helps them out. but i didn't like your reference to canada. canada is america's greatest ally and friend. we should work together on energy. what in -- what is -- imaginabye what could be bad about working with canada? >> the issue isn't about what is bad working with canada. the question is what is good for american energy security and gas prices. and the keystone pipeline is sending that oil to the gulf coast where it is refined for product outside of the united states. the united states over the last 12 months already exported a record 3 1/2 million barrels of oil and refined product a day. >> that's extremely misleading. >> it isn't. >> they are. we cannot use them, that's why we export them. ken green, let me go to you. >> yes. >> this pipeline will get all kinds of gas, all kinds of oil to be refined to the east coast and west coast, which we have learned from the hurricane emergency, we desperately need. and ken, one other point, the head of the afl-cio building trades, has been on here, 220,000 immediate jobs and as much as 500,000 indirect jobs. ken green, how can we not do the keystone pipeline? >> it is a no-brainer. canada is our ally. you don't blockade allies and trading partners when they are trying to get goods into your market when they both benefit from the trade in the market. we have over 2 million miles of pipeline which are operated safely. we can certainly build another one to operate safely. this is the environmentalives trying to bottle up the oil of canadians and americans because of their concern of climate change. it is not about cost or export markets or any of that kind of thing. they don't want it say it is about climate change. >> radical environmentalists that hate fossil fuel. come on, tyson. that's your real position. you hate fossil fuel. >> larry, i didn't understand the, understanding the science, makes one a radical. the fact is, there is no question, concerns about the keystone pipeline are all about climate change. the problem i have is when proponent of the keystone pipeline claim erroneously that it is for energy security in the united states and for lower gas pricees. that's false. will the keystone pipeline create jobs? of course it will. i don't dispute facts. but i do dispute the lies that people say when it is going to reduce gas prices. there is nothing about this pipeline project that is about lowering gas prices for american consumers. >> that's a bit after red herring. people aren't making lower gas -- >> during the -- they sure were -- >> oilers to refiners for gasoline. >> ken green, i want to ask you about this export issue. my impression is that it is certain distoluates exported. we need it to the gulf to be ex ported to the east and west coast. what is your take on that? >> that is my understanding as well. and the refineries will also capture profit for their investors and their workers, giving them more do t.o. do. it is not as if they work for free for the canadians. they will also profit, as well as those building the pipeline. canada is a share of the world greenhouse gas emissions. the whole country could shut down and it wouldn't change the climate trajectory of the future. china and india reafarmed they won't accept greenhouse gas control. greenhouse gas is from canada as a threat to the world is really just bogus. >> we are the least -- last one ken grown, real fast. what about north american energy independence? this changes our security position relative to the middle east. it has to be a good thing. i give you 20 seconds. >> yeah. global trade and energy is good but we are already on the way to north american energy independence between our own growth in oil and gas and ka kan da's export to the united states. we can easily be there in 20 years. at which point north america would be an energy powerhouse exporting energy to around the world to everybody's benefit. >> thank you, gentlemen. tyson and ken. >> have a good thanksgiving. >> this slast thing you want it see on one of the busiest travel days of the year. union workers protesting outside l.a. international airport. are you kidding me? one of the best parts of this story is no one even invited them. the very people they think they are representing don't want to be represented by them. and i'm going to ask the president of that union what is up with her thinking. next on kudlow. i don't spend money on gasoline. i am probably going to the gas station about once a month. last time i was at a gas station was about...i would say... two months ago. i very rarely put gas in my chevy volt. i go to the gas station such a small amount that i forget how to put gas in my car. 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[ male announcer ] e-trade. investing unleashed. >>> does this sound familiar? mortgage loans going to people with bad can credit? buying a home with just 3% down? sounds like what got us into the housing mess to begin with, right? still happening. still happening all thanks to the government and now the government will have to bailout yet another housing agency. that's what it looks like. here now is steve maister managing partner at maister selig and fine. welcome back, steve. this is the federal housing administration, right? fha. they are short, you tell me, they are short $56 billion in reserves. that's to me, puts them on the edge. bankruptcy. >> that's right. there's no question as taxpayer bailout coming here. look, the government, obama administration just loves sub prime mortgages. this whole enterprise, this fha, is really a garner to of sub prime mortgages and taxpayers are going to pay big time larry. >> as though we haven't learned anything from $140 billion bailout of fanny and freddy. correct me if i'm wrong, but 40%, roughly, 40% of the loans that they insured just under the last year or two, have been sub prime loans. they haven't learned a thing. >> they haven't learned a thing. or maybe they just don't care. but yes, you're absolutely right. 40% sub prime loans. moreover what it is, is people who have gone through one, sometimes two foreclosures, bankruptcies and have razor thin down payments. for some reason, that i cannot possibly fathom, there is this push to quote unquote demock ra advertise credit. what is wrong with renting? why would someone through two foreclosures be put into a new loan. and what is it going to do for that person? look what happened to minorities with the housing crash. >> is the fha deliberately trying to pick up the slack from what is not being done, thankfully any more, by fannie and freddy? that's what i want to know. to me, that's what these guys are doing. >> i think that's absolutely so, larry. and i think what happened is the dirty little secret is the push that began in the clinton era with janet reno and agency task force to force banks into making sub prime loans, that's not happening any more. banks are requiring real down payments. now they are just insuring the loans through the outright federal agency, fha. it just goes to prove that they love, just love the sub prime loans and they are making banks pay up, larry. they squeezed a billion dollars out of major banks to help fund the fha's bankruptcy. >> i love this. really, alleged clerical errors more than anything else. and they are trying to shake them down to finance the fha mess. i've owned a bunch of properties down through the years. homes, you know, houses, i've owned apartments and what not. i've always had to pay, at least 20%. and my last question to you is, why don't we restore 20% down payment? >> larry, when i was growing up, as a young man, that's what it was. you went it a bank, it was sleepy old time underwriting. 20% down. you had to have enough income and little enough other debts to make a very simple underwriting. that's why housing never went down for 50 years. but when you push sub prime loans and the government forces them to be made, now through a direct agency, the government, of course you will have an asset bubble. maybe another housing bubble. i just don't know # get it. i don't know why we're not just returning to that and leaving well enough alone. it worked for half century. >> you betcha. you betcha, steve maister. thanks for helping us tonight. >>> we switch gears. seiu gears are snarling traffic outside lax. one of the busiest travel days of the year. they are claiming to worepresen workers that don't want anything to do with the seiu. what do they hope to achieve, aside from contributing to major traffic delays? here is the international president of that union, seiu. mary kay henry. ms. henry, with all due respect, as i read every single news news article about your operation, you are not only tying up traffic on one of the busiest days of the year regarding airplanes, but you claim to represent employees that don't want anything to do with your union. what's up with that? >> i was proud to stand for jose la bara who worked for stave guard for years today at lax airport. he was ginned by hundreds of fellow coworkers at the airport because we are fighting for good jobs at lax. >> that's not what they are saying. >> that's not what the company is saying. >> the company is saying, frederick mcneil says you bring if outsiders to block traffic and that people in their union have been trying to get out. they are trying to get out of the seiu. you're helping people that don't want your help and it sounds, ms. henry, like you are bringing outside agitators. people that don't work at lax, in order to do it. that's what it sounds like. >> no, larry. we are standing up for rebuilding the american middle class. ed with workers that were asked to sign a paper, getting rid of their union, if they received a $5 increase. and the employer withdrew recognition and took away healthcare benefits. we think that is just plain wrong tp it is illegal. we have been trying for a year to unsettle it. the company is unwilling. we went to city hall, the bargaining table. we took this dramatic action today because workers are very concerned about their loved ones that are trying to get healthcare coverage. >> they keep saying they want out of your union and they can get health benefits on their own or, by the way, i suppose go into obama care. which i know you support. >> across the country, workers need a raise -- >> they don't want your help. ms. henry, you know what you are doing to middle class people? just making their thanksgiving rotten. >> larry, you are repeating an inaccurate statement from the employer. over 50% of these workers support their union. they want good jobs with wages that they can feed their families on. we want to restore middle class jobs at lax. >> then why don't you do it in an orderly way? >> we've been trying for over a year to do that. >> instead of disrupting a big airport like lax on thanksgiving. there are ways to -- >> we tried -- >> even though they disagree with you, they say they don't want your support. >> we have been doing that for a year, larry, and the executive director of this airport, anna marie lindsay, could have handled this situation by stepping in and requiring aviation safeguard to live by the living wage ordinance that guarantees living wage and healthcare for every worker in l.a. that's what we think needs to happen for airport workers all across the country. o'hare workers demonstrated. jfk workers were demonstrating today. >> take them to court pch you'ron union is going to be so unpopular as a result of tying up traffic. >> we will stay in the streets until we get justice for airport workers. >> i wish you a happy thanksgiving, even though i absolutely totally disagree with what you are doing. that's it for tonight's show. thanks for watching. happy thanksgiving. 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Nov 25, 2012 10:30am EST
. people are waiting -- waning. >> it is not just the labor groups and liberal groups, ceos and the business roundtable -- ceo's and tehe business roundtable. >> the democrats have made very public today are talking to. they had the walmart ceo up there talking about the holiday season and how it is important to extend the cuts. i was told the other day the the republicans are getting their ceo campaign on entitlements. this week you're going to see a lot of focus on the entitlement portion of this. the republicans have held their tongues for the past couple of weeks, but privately they have said, the whole discussion up till now has been about revenue. there are starting to marshal their ceos to come out -- ceo's to come out and make demands on entitlements. >> so many of the business leaders, if you do not want to go over the fiscal cliff? -- fiscal cliff, they want it to be a stage set for tax reform. >> thank you for being on "newsmakers." [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> watched mary kay henry, the service employees and national union president today again at 6:00 p.m. on youc-span. >> general, what if the soviets -- soviet union announced tomorrow that if we attack cuba there will be nuclear war? >> that is a serious thing. we're going to be uneasy. something may make these people shoot it off. >> i would want to keep my own people very alert. [laughter] >> it is a fascinating moment. it is amazing that eisenhower tells him to have his people alert, because everyone is completely on edge. kennedy last, and then he says, hang on tight, which is a nice moment that even on this terribly tense day, they're able to joke a little bit with each other. especially during this crisis, i think they have a sense of how lonely it is to occupy that office and how you are given all kinds of advice. eisenhower knew all about faulty military advice. he was able to speak with his supreme authority about the dangers as well as the advantages of military advice. he was a very useful ally to president kennedy. >> ted widmer on "listening in," .onight at 8:00 on c-span c >> now we will discuss education policy and school choice with kevin chavous. this is about an hour. >> thank you all for coming tonight. i hope you have a good time and learned quite a bit about "gen next" and the topic tonight, which is education. "gen next" is an organization of entrepreneurs and executives. the reason we have this type of membership is because we believe in developing and deploying an engaging talent. our mission is clearly generational opportunity. we want the future to be at least as successful as the past. you hear some debates about our best days are behind us. we do not like that narrative. we want to take. don draper of "madmen" said, "if you do not like what is being said, change the conversation. -- conversation." in your talent and resources could be used to even be more accomplished and how you are now. economics education and secur, education, and security. education is the most important issue. you're talking about true generational investment. there is a moral element. you're giving it had a shot. there is an economic element. we're struggling a lot in education right now in the country. you read the news, the teachers in chicago are on strike. across the country, you read about how other countries are hungry, ambitious, educating their kids. we cannot refocus and make sure -- we marshall the priorities of our country to get ahead. we have a speaker tonight who is extraordinarily influential. there is a quotation, when it comes to the future, there are three types of people. those are a fluke -- who let it happen, those who make it happen, and those who wonder what happened. our speaker tonight is kevin chavous. he makes it happen. he is a businessman, attorney. he is a bit of an entrepreneur. that makes him a remarkable. what makes an extraordinary is he is a true leader. he was on the d.c. council and helped start the charter and dr. program. he wrote a book called, "voices of determination," a testament to how kids can be an example to adults and overcome great odds. he is a founding board member of the american federation for children. he advises governors, legislators, mayors, congressman all across the country on choice and charter and education issues at large. he is in the thick of the game, and without a doubt, a complete leader on this issue. you feel his influence on this issue across the country. we're very fortunate to have people like him who are entrepreneurial, savvy, accomplished, who dedicate that talent to shaping what future educationan will be. please give kevin chavous and round of applause. [applause] >> thank you all very much. i think i can go home now. [laughter] i was wondering who you were talking about. [laughter] i love "gen next." when he talked about education, it is true that all that is a focal point of "gen next," it should be the focal point of this country. i like to tell people that on my way to public service i found my passion. i got into education reform largely because as an elected official in washington, d.c. i would visit schools and talk to teachers. after i was elected for the first time in 1993, i would go to school and see a couple of these bright eyed kids in some of these low income communities. troubled, challenge neighborhoods. troubled, challenged schools. i said, what is that kid's story? the teacher would tell me. the kid seemed to be so energetic, so bunch potential. -- so much potential. a couple years later, i hear he got dropped out. that kid never could read. it struck me when i looked at the negative social indicators in washington, d.c. -- similar to other countries around the country -- all the negative social stuff was directly related to the lack of education. 90% of the inmates in d.c. were high-school dropouts. in terms of homelessness, joblessness, drug addiction -- there are statistics out there now that if we increase the high-school graduation rates in this country by 10%, we reduce the murder rate by 20%. all of these indicators show that there is nothing more important than education. i became passionate about this. even today, 15 or 19 years later, it is the only thing that keeps me up at night, to know their children were going to wake up in this country were going to go to school but will not serve them well. over a short period of time, whatever potential they had, that they were given by accident of birth, they will lose. there is something tragic about that. i said, well we look at all of this stuff out there and this idea of having this one approach tailored to fit all kids, where you put a circle and a square, that does not work. -- in a square, that does ntot work. what a child needs who comes from a dysfunctional or party background, we do not need to let that child off -- poverty background, we do not need to give up on that child. we say, every child needs to take algebra in ninth grade. but what about that child who is ready for it in the seventh grade? what about that kid should be taking it in 10th grade? the problem with traditional public education as i saw it when i became a student of this in d.c. is that we do not meet children where they are. we try to force them into learning the same day, the same way, and the same things. at the end of the day, that is when i began to embrace change. what this change look like? nbc, i was very fortunate -- in d.c. i was very fortunate. we have one of the most prolific charter movements in the country. 42 percent of our public school kids are in charter schools. the test scores are higher than children in traditional d.c. schools. we have our first federally funded voucher program that allows kids from economically challenged communities to go to private schools. kids can go to national cathedral, all of these great private schools. now we have got nearly 2000 kids that have had this for the past seven years. it struck me after seeing the success of these programs that that as an effect jump-start its some change in traditional d.c. public schools. -- started some change in traditional d.c. public schools. in d.c., like other cities, we have a long way to go. these innovative and creative programs, when you give these parents options to help meet these kids where they are, it allows us to fly the plane while we fix it. people want to put us in these boxes. if you support traditional public schools, or you are against traditional public schools. are you a democrat, in your going to support some of the status quo, or you going to be a progressive and support innovation creativity. i do not think it is a zero sum game. when it comes to educating a child, there is no republican or democratic way to educate a child. there is no black or white way to educate a child. there is no rich or poor way to educate a child. when it comes down to learning how to read and write and count, there is two things are important. you have a student who is there who wants to learn, and you have a teacher who is quality based who has a passion for educating these kids. i have seen over the past few years where we is falling short is we are so stock on the way we used to do things. the economic argument, the analysis of our failure to educate our children, the look that what they call achievement gaps. the difference between the education of attainment of children of color and their white counterparts, the educational attainment of all low-income children in this country and their counterparts. all u.s. schoolchildren compared with schoolchildren across the globe, from other industrialized nations. they said, our failure to close these gaps -- if we had close these gaps 10 years ago, we would not have suffered the recession we have now. our failure to do so has led to a permanent national recession larger than the one we are currently experiencing. they said that it has taken $2.30 trillion of our gross domestic product, money we could have added to this economy. we are now in a place where we are playing catch-up with countries that used to crave to be like us. it is so bad now that while our university systems are still where they should be in terms of reputation and attainment, no one from other countries want to send their kids over here to our k-12 schools. they do that there and then it they will say, will try some ivy league school. we need to seriously look at, what is it going to take to change that dynamic. in recent days, we have heard about the teachers' strike. i think that the big challenge we have, if we put ourselves in these partisan boxes and we force people when we talk about education to take sides -- the side that is never adequately represented in these discussions is kids. i just posted on my blog, i said, okay, how will it teachers' strike in chicago help kids? i got all these responses from people who love teachers, people who are mad at teachers. i had 40 people just immediately respond. no one answered that question. they started talking about, teachers to not want to have these evaluations. this 10 year issue. teachers want to make sure -- tenure issue. some of the ones who are going to be laid off should not be in the classrooms. no one talks about the fact that any time you take these kids out of a classroom, particularly kids that need more time, they lose. who is thinking about the children when it comes to these issues? what is interesting is, recently in boston, they reached their agreement on the teacher's union contract and have been fighting over it for the past two years. their contract the day disagree to in boston is very similar to what is on the table in chicago. -- the agreed to in boston is very similar to what is on the table in chicago. at the end of the day, no kids lost time out of the classroom. we're at the point now where we need to evaluate these educational proposals based on one simple yardstick. will this help a child learn? if the answer is yes, we should be for it. if the answer is no, but we should be against it. what will it take to change the dynamic? the solutions lie in accountability and quality teachers and autonomy. one of the solutions is also apparent choice. the more parents step up and speak out and pressure the system to change, the more than have to respond. the fallacy is that we expect that bureaucracies will reform themselves from within. i do not know about you, but in my spirit, i do not know an example of any bureaucracy -- experience, i do not know of any bureaucracy that has changed from within. the only change from external pressure. the best form of external pressure is parental choice. when they see what i have heard parents who had the benefit of quality schools that otherwise it did not have, when i see and hear what they say when they had their kid in a good charter school or good private school, and they can go to the neighbor school for the next kid coming up and say, my cousin's house is over here, how come i cannot have it over there? that is going to change the system. we need to change this mission. one of the reasons why chicago lend itself to all of these adult issues and interests is, the mission was not clear. the mission and our school districts are not clear. do you know what the mission is for most school districts and teachers? it is not what it should be. we need to realign the mission in a way where there is only one thing that is important, and that is the academic achievement of these kids. right now, that is not the mission in chicago. the mission for the teachers' union and the leadership was, we want to maintain the integrity of the tenure, make sure we are not given evaluations we do not like, and we want to make sure that we get our increase in pay and paid accordingly. nowhere in the discussion was the talk about the academic achievement of children. if we go back to my general proposition that we need to make sure that we have front and center, will this help a child learn, just imagine if school districts across the country adopted that as a mantra. when i said that one teacher, she said, how would it help me? if a allocate money and everyone knows the goal, if you run a business -- if you have a common goal as part of your business mission or objective and to tailor everything you do and have towards meeting that goal. the school districts, our goal is to have all of our kids at 90% to 100% proficiency. what do we have to do it for poor johnny or jane who might come from a poor neighborhood. we have got to have the best teachers in front of john and jane. we of got to have the best resources there for john and jane. the way it helps teachers -- the things that a lot of teachers complain about now in our urban school district where they do not have supplies and blackboards, the need to have books. a lot of the additional extravagances we see in central administration would disappear if everyone's main goal is education. that is something we need to focus on. i want to make sure it takes some questions. i know they're going to be a lot of softball questions. [laughter] we have got to feature these stories that work. in my book, i decided to write it because as igor run this country have been in nearly every state -- as i go run this country and have been in nearly every state. -- around this country, i have been in nearly every state. i ask the question, tell me this kid's story. tell me that kid's story. i am amazed at the resiliency of our kids. oftentimes, it does not take but one or more little positive influence in these kids' lives to change their life to directories. -- trajectory. it struck me, we see it when people talk about performance pay, chicago, no child left behind -- it is so easy for it to feel like it is not personal to us. the policy stuff is like numbers are worse on a page. if i would go around the country -- words on the page. if i would go around the country and visit schools and five of the stories, -- and find these stories -- we are in a nation of storytellers. when you connect with the challenge, it helps to get motivated to embrace solutions that work to meet that challenge. i asked a great school operators from around the country to introduce me to some of the most successful stories. kids who overcame the odds. the farm girl in indiana who was a member of the national honor society, but knew she was not up to her grade level. she used to skin pigs and do all that stuff. country girl. she is 14 years old. she says, i want to be a veterinarian. her name is jamie. she wanted to be a veterinarian. she says, i cannot be a veterinarian when they give me grades i have not heard. she begged her mother to home school her. her mom says, i do not know what i am doing. at the church found out about a charter school that was a few miles down the road the just opened up. she went there and found out that she had a learning disability that had never been diagnosed. it turned her life around. or the young man who was at the high school in st. louis, and the teacher ended up, knowing this guy had challenges with this mother, he had been abused by her boyfriend -- the mother would not give any support. the teacher said, this kid is smart. the child's goal was to graduate. he knew his mother would kick him out of the house at 15 years of age. the teacher noticed that this young man was always at the school. in one night, he was nodding his head at a meeting. he was the only one under 65 there. he was waiting to eat the snack ahead assembled. the teacher, followed him down the hall, up the steps, down the hall, up some more steps. 9:01 night. he climbed up into the roof of the boiler room -- 9:00 at night. he climbed up into the roof of the boiler room. he had been living up there for three months. he got into a fight with his mother. his goal as a senior was to graduate. he did not want to go into foster care. this teacher found a place for him. he graduated, he went to the army. he was the first one in his family to graduate from high school. the stories are real. they are not about whether there should be a charter school or traditional school or private school or homeschooling, or magnets schools, or religious schools. they're about making sure that we have a whole menu of options. just like on the buffet serving line. so that we can meet all these kids where they are, whether they are like donald or jamie. ronnie, african-american kid in the heart of the city, for some reason, at 30 or 40 years old loved writing poetry and finally found a teacher who would meant for his writing poetry. one of poetry contest. a scholarship to go to college. some the only one in his neighborhood and his whole public housing community that went to college. it was even more of a challenge because of the pervasive nature of drugs and crimes. he was on a peewee football team at 14. but the time he was 22, 18 of those 22 teammates were dead. two were in prison. one, they did not know what happened to him. he was the only one who graduated from college. ronnie is the first to tell you that for him, he had someone who invested in him and believed in him. made him feel like his love of poetry was not weird. that changed his life trajectory. i try to share stories like ronnie and jamie and donald and others, all the verse, all coming from different walks of life, because that is the american story. those are the american stories that are out there that do not have anything to do with the no child left behind or the chicago teachers strike, but have everything to do with those things because that is the soul of the issue. if we are going to change the life trajectory of these children, we have to respect their needs. we need to make sure those adult interests that predominate, they need to be front and center away from the equation and we need to put these kids where they need to be, put their interests first. one final thing before i take some questions. i happen to be on president obama's education policy during the 2008 campaign. they did not kick me off. i survived. [laughter] they may have wished they kicked me off but i survived. how it is interesting to me, if we look at this presidential race, and, already, people are drawing these artificial lines in the sand about the republican education plan, the democrat education plan, and i offered a suggestion, i assumed the role of speech writer for both of them before the convention, and i sent a script to both of them, and i said, either one of you can bite at this. you should start your nomination speech in the similar following manner. "there is a lot my opponent and i have to disagree over. i want to talk about the most important issue facing the future of this country. that is the education of our children all too often, we have put ourselves in a position where we have allowed for partisanship to dominate and dictate our policy directives as they relate to the future of our children. as nominee of the party, i will say that we will end that. i will suggest to my opponents that we meet one on one and we sit down without any staff and we lay out a prescription of issues to be addressed to make sure we fly the plane while the exit and educate these children. we will understand we are not guided by our party leaders, but what is best for the future of this country. you cannot have a solution without a blue ribbon panel, so we will have one on both sides to hammer down these issues as we move into the future months. going forward, if i do not win, i support this process and will work to make it happen with the new president and i expect my opponent to do the same. this is so important, that american competitiveness will fail if we do not start educating our children. where we used to be number 1 in math and science compared to other industrialized nations, now we are in the 20's. we still have some great schools, but some of those good schools are not as good as they used to be. it is not a problem that this affects lower income children of poverty. it should not be based on the politics of the day." that would have been a nice domination speech to hear -- nomination speech to hear. [applause] what is hopeful, what is exciting, here is that we are seeing that approach happen in some states, where a republican governor like bobby, who worked with democrats to put together a state wide scholarship bill. in florida, they had the scholarship program, for kids to get scholarships to go to private schools, when that was passed 10 years ago, we had one member of the black caucus vote for it. when it came up for renewal, we have the majority of black and hispanic caucus vote for it. each of them said we are doing this because it is helping our children. as we move forward, that has got to beat the order of the day for our country. thank you all very much. i appreciate your generosity. i want to take some questions before we have to wrap up. thank you. [applause] >> thank you very much. i appreciate what you are doing. in california, we have not adopted as much, doctors and twice as you have seen in washington d.c. when we introduce choice, the public schools, the bar will rise because they have to keep up with the charter schools. is that a belief you experienced in washington d.c.? what happened to the public schools and how they performed when that 42% to place? >> it makes a difference. i do not think you can have reform and education without choice. without choice, there will not be an incentive for the bureaucracy to change. it is easy for people to fall into the category of, if you want change, you push for change. i support public schools. i gave teachers the largest raise they ever got, gave the schools more money than they asked for, their test scores and results went down. more money, your kids come and the task force went down. that is because it is like a blob, bureaucracy, like a vacuum cleaner that sucks away the money from the local schools and pours it into the central office. you have all of these cost centers and all of these purchase resources. when money comes in, studies show you are lucky if 60 cents on the dollar goes to the classroom. in some places, it is far less than that. you have the assistant to the assistant deputy to the assistant of the assistant deputy. [laughter] i had a hearing in d.c. once and the superintendent was there. he had briefcases of papers from maybe 30 people. he was going through and i would ask him questions about the budget. did we not give you money? i said, you will testify. i start asking, what do you do in your day? he says, i am the assistant to the assistance of the assistant deputy. i make the books get in on time. i say, how does what you do from 9:00 to 5:00 help johnny learn over here? he says, i am a central employee because i am the assistant -- ok, fine. that is the problem. through these other options, we have learned that we are finding possibilities. parents are saying, wait a minute, if my teacher it needs a blackboard, they do not have to requisition downtown and get five people to check a box and maybe get it or maybe not? wow. they will get a computer and folks know how to work a computer? i am not passing the schools, -- not bashing the schools, but the reality is unless the people know what is possible, they will not ask for it. that is the reality of choice. you do not know what to ask for. vision is seeing beyond what you can see. if you cannot see, you do not know what to ask for. that is what is happening. we are seeing in florida, louisiana, indiana, d.c., milwaukee, and people now, what is happening is you are seeing in california, when parents are saying, i am mad and i will not take it anymore, for the first time, there is some momentum for change. the one reference point we can look at is detroit. when they changed their mission from making sure they had a jobs program to quality cars, it changed everything. it improved the work product. the competition, people would buy japanese or china, the consumers will be educating consumers. we have seen examples in these places where you have a robust choice program, a robust pressure, it just starts change. one superintendent, who i will not call the name out, said to me, you keep pushing this thing because it helps me light a fire under my folks. thank you. >> kevin, thank you so much for being here. i gave your book to my 12-year- old niece, who was in cash plus school. -- in catholic school. after reading the book, she said, i want to go to public school because i want to meet those kids. [laughter] changing gears to chicago. you have 350,000 kids there. 40% of those kids are not graduating. there is significant poverty. where do you see that conflict ending? they are looking for teacher evaluations, pay raises, to end tenure, longer school days. yet parents who are not engaged in the process and so the kids are at the whims of adult interest. >> i think the mayor is right. he is right not for the reasons a lot of people say he is right. he is not right because he did not blink. it is not because of that. i think he is right because we need to elevate the discussion. we need to elevate the discussion away from the approach we used in the 1960's, and what we need to use in 2012 and beyond. in california, teachers get automatic tenure for life after two years on the job. they do not get evaluated and they cannot be fired. in this state, you cannot even fire a pedophile. it takes years to fire a pedophile who is a teacher in california. there is legislation to allow the superintendents' to fighter pedophiles and that did not pass because the union block it. to them, the 10 year issue is sacrosanct. i think the mayor is right. as opposed to being accepting of the old job rules and situations where people cannot get evaluated at all, we need to talk about what accountability should look like for children. i am not saying if every kid does not get 95%, the teacher should be fired, but it should be an indicator. in boston, they agree to this new deal to the evaluation scores, 25% of the teacher's evaluation will be based on test scores, that sounds reasonable to me. you get a group to evaluate teachers, you have to have some objective accountability standard. based on what the kids are doing. he did a good job elevating the discussion. when i asked questions about how this helps a child, i do not want the response to be, we are standing up for our rights. that is not the response. to me, if our mission should be these kids to learn, adults should have to take a back seat. i think you will see more of that. now you have got an interesting mix of urban political leaders and you have got some conservative legislators. they are pushing this. some of these urban leaders are doing it because, it was said to me, in my district, i have 70% of the people not working, i have got a war zone, and i cannot get bill gates to bring a business. i could not give a business to come to my reward. did i could not get a business to come to miy ward. i have no economy. the only way to change that dynamic, in my urban neighborhood, is to have a more educated population. you have got these city leaders who realize their economy is eroding with every kid who dropped out. that is why you see the mayor's standing up. if he allowed the same to go in place, does anyone believe it wouldn't affect the dropout rate? at some point, you have got to change it. over here. >> you talk about foreign competition in china and india getting ahead of us. is the model we have in place for teaching our kids that was built in the industrial age sufficient for the information age? is the curriculum in place sufficient for the 21st century to develop new businesses to bring the economy forward? >> that is a softball question. [laughter] no. when we built as education system, summers were also taken work on farms. it was a compromise with farmers. that is why we have the schedule. when we put that system in place, there were no cars, planes, were electric lights. computers, on and on. the bottom line is we have an over allegiance to the system based on the stock to a. -- based on nostalgia. my mother went to the school. my grandmother went to the school. you cannot close the school. 95% students were failing and parents were still fighting for the school. i ask them and they said, my grandmother went to the school. i would say, the grandmother passed? your kids are not passing. [laughter] i believe in sentimentality, nostalgic, and preserving neighborhood icons. if you are failing 95% of the kids in the school, either you are going to change or we are going to shut you down. we should be consistent. it does not matter what kind of school it is. shut down the bad charter schools. we put this model in place and then what happened with the workers' rights and the teachers' union, it helped to prop up the system. it is so easy for folks to see this and say, you are bashing. i am not. a i believe in quality teachers. if you know a teacher who is a good teacher, they will probably confirm everything i am saying. the good teachers hate when they know the teacher who has the kids the year before, they know they will have to be unprepared and they will have to work twice as hard to make forward. -- make up for it. they which they could get rid of that teacher, but they cannot. to embrace the information age, we cannot if we are in the 1800's. that is why others are blowing us away. they started overtime in taiwan -- they studied us in taiwan and belgium, they look at what we are doing and then they grabbed hold of this technology opportunity as a way to blend learning, virtual learning, accountability, autonomy, choice, making sure teachers are judged based in part on the performance of their kids, and this turned around did not happen overnight. we have to divorce ourselves from the history of how schools started and view it as a continuum. we need to move beyond that neanderthal phase and start walking on two legs. instead of all fours. which is what we are doing with traditional education. >> you talk about choice. you gave the example of detroit. they went to a capitalist, competitive, is there any direct conversation happening about let's capitalize education. let's give the choices so the parent and student is in a competitive environment. as we all know here come when there is competition, the bar rises. ones that are weak fall to the sides. >> this is the way i view it. i do not think we need to be overly prescriptive about what the right education model looks like. the one-size-fits-all. i think each community has to -- the first thing is to expose varied approaches and options to the family and community, and they will gravitate towards the things that may work best for them. i tell my friends, because, i love the tip schools. they are great. but not every school can be won. there are some folks that say we need to have everything look like that. i think we need variety. frankly, that engenders more competition. everybody likes starbucks. i am glad we have these other ones. [laughter] i want to make sure we do not get so committed to the solution being one solution or the solution. when it comes to education, the dynamic nature of it is we should have a diverse offering of selections from parents and families. >> you are dedicated to this cause. if you were to say one thing we could do in our community to help change, here in california, 10% state tax, we see where our dollars go and not performing in school, many people go to private schools, what would you say to us? what is something we can do? >> that is a great question. first of all, we have got to have courage. one of the reasons why we have not had changed is because there has not encouraged to speak. --because political leaders have not had courage to speak truth to power. i cannot tell you how many times i have given speeches and i have said some of the things i said tonight and officials say, keep saying that, but i cannot do it. first, you have to have courage to speak truth. all of you are successful. when you see your elected officials, you see people running your schools, you need to ask them pointed questions and not take the normal platitude or feel-good stuff. more money for teachers, larger classrooms. all that sounds really good. what are you going to do about the work rules? what are you going to do about making sure the principle can run their schools and not have programs hoisted on them that come from the outside, or have someone from downtown who has not been in the classroom for 35 years check a box. we sometimes let the politicians --i am not running for anything. we are good. [laughter] you can go to these folks and ask them questions and challenge them. do not accept the same old answer. the other thing you can do is one of the reasons why i want people to read my book. everybody has it within them to help another child in need. do something i will give you a quick example. there is a friend of mine who i went to law school with who asked me, she said, i have never been married. i really feel like i want to help these kids. give me a suggestion as to what i should do. i said, you should go to a community hospital. you should hold some of those crack babies. they have a shortage of nurses. they need to be held. they do not have enough nurses to hold them. you should offer your time. she started doing that. holding some of those babies who were born addicted to drugs, that may have helped change their life trajectory. at that early stage, just being held is one of the best things that can happen for those children. each of us can do something. figure out how you can help a parent learn and do not be -- help a child learn and do not be afraid to speak. that is something we did our leaders a pass on. >> i would like to acknowledge you for the work you are doing. it is something we all appreciate as we are busy running our businesses. and living our lives. i saw "waiting for superman." it out raised me. -- it outraged me. i had no idea about the things that exist in the system that are really devastating. as somebody with your viewpoint and seeing things all across the country, other any examples that are evolving that we can look at as an example of progress or success that we can look at and kind of understand, where is the hope in all of that. >> a great question. there is another great movie coming out, "won't back down." you have a teacher and parent coming together to change the schools. talking about the stories is real important. when you see "waiting for superman," i know all the statistics, but as soon as i sought, i needed to know what happened to daisy. i found out she did get into school. it tugs at you. florida is a good model. jeb bush is on another side of the political spectrum from may, but he did a good job of forcing florida schools accountability. right now, several years later, the african-american kids' test scores in florida are on par with white kids in the rest of the country. by putting accountability in and giving some examples of opportunities for choice, he created an environment for these kids who are far behind and are now moving forward. some of the stuff done in new york was amazing, particularly the principals academy, where he had a goal to get some of these strong principals to get into management sessions. he had a pipeline of them. those teachers put pressure on the traditional teaching pool to be better. the models are there. like it or not, most of education will be driven by state agendas. that is why the work you are doing here is so important. the state leaders have to be responsive to this issue. they need to put these kids first. we get them to do that, and we can change this. thank you. [applause] >> this is our custom, so you can write down your next speech. [laughter] you can enjoy a glass of wine. >> do you have a corkscrew? [laughter] [applause] >> thank you. >> and, cut. [laughter] [captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] >> tomorrow, we will talk about the future of the republican party. our guest is matt lewis. it will be followed by a discussion of the plane that session and other issues -- of the lame-duck session and other issues. we will talk about the economic practices and options for congress and the administration. "washington journal" is live at 7:00 eastern on c-span. >> if we turn away from the needs of others, we align ourselves with those forces bringing about this suffering. >> the white house is a bully pulpit. you ought to take advantage of it. >> obesity in this country is nothing short of the public health crisis. >> they told me when somebody had their own agenda. >> it is a shame to waste it. >> i think they serve as a window on the past to what is going on with american women. >> she becomes the chief confidante. she is the only one in the world he can trust. >> many of the women who were first ladies were writers, journalists. they wrote books. >> they are in many cases more interesting as human beings than there has been -- husband, if only because they are not defined and limited by political position. >> dolly was socially adept and politically savvy. >> dolly madison loved every minute. mrs. hamilton hated it. >> she warned her husband cannot rule without including what women want and have to contribute. >> there was too much looking down. i think it was a little too fast. not been a change of pace. >> yes, ma'am. >> they never should have married. >> she said, i never made any decision. i only decided what was important and when to present it to my husband. you stop and think about how much power that is. it is a lot of power. >> part of the battle against cancer is to fight the fear that accompanies the disease. >> she transformed the way we look at these bugaboos and made it possible for countless people to survive and flourish as a result. i do not know how many presidents realistically have that kind of impact on the way we live our lives. >> just walking around the white house grounds, i am constantly reminded about all of the people who have lived there before and particularly all the women. >> first ladies, influence and image, a new series on c-span produced in cooperation with the white house historical association, coming in february of 2013. >> next, we will talk about challenges in higher education, including competition for out of state students, online courses, and adult education. this is 1.5 hours. >> i was thinking about the title. i do not think we are at present this or crossroads. i think there road sign would be steep hill, changed gears, or sharp curve ahead. maybe pavement ends, rough road ahead. things are definitely changing. last night, we heard bob say he thought public universities have become ungovernable. it seems this is some evidence for that. we have a great panel to discuss it. jane is the executive director of the national association of system heads and founder of the delta project on higher education financing. next to her is the director of the cornell higher education research institute. he is a past trustee of cornell and the current trustee of the state university of new york. dan convened our symposium and is a past president of the university of vermont. jim is the president emeritus of the university of michigan who put the michigan people together. pete is the head of the association of public and land grant universities and also the past president of michigan state. i think governance is a big issue now. over the last year, we have seen a lot of public university presidents founder in some way. it makes you wonder if it is a doable job. shortly after the fiasco at the university of virginia, i was talking to a lot of past and present public research university people probably the most passionately frustrated of them is, who is now at a private university in florida but is the past president at the university of wisconsin. she said, it was so much easier to run the department of health and human services, which is huge, and the university of wisconsin because i have some power. i could do something. as a public university had, we do not have any power. we are just tugboat talk to in -- captains. all we can do is try to persuade. thinking about that with some of those who have run into real problems. it was not an accident. it was not just a failure of communication. it was about a real structural difficulties about whether that campus should have the freedom to do many different things and have more independence and set tuition differently. the system was saying no, you are abandoning us. it was a real structural difficulty about should be a candidate be free to do anything and have a lot more independence and set tuition differently than the others, and the system saying no, no, no. in this happen -- it is probably no accident that she is now at a tiny liberal arts school. the president there went a little further, but got into exactly the same trouble. he said we should be on down -- unbound from the system and here is my idea for how we will finance its. we will put out bonds. you will put out bonds. we will raise money at the school in between. the state will pay the interest. then we will never bother you for money again. the board did not like that. it was a four-hour public hearing or people said, please, please do not fire him he is our only hope for the future, and he was gone. i am wondering. are the presidents realy tugboat captains? if you push or pull too hard, do you lose the ship and are out there by yourself? interesting that michael crow of arizona state will be called back today, to not be on this panel. but to talk to his board. there is something going on. i wonder if you think that this goes to something. effort -- peter mcpherson, let's start with you. >> i think it is easy to be a little but of a doubles -- a little bit of a devil's advocate here. these are very hard jobs. they are very complex jobs. universities, when you compare it to the business world, it is a huge conglomerate. they are always complicated. but if we look at the president's to have left their positions over the last year -- the presidents who have left their positions over the last year, think of other industries that are either under financial pressure -- high-tech industries, various sectors that are changing. their ceo's have shortchangers often, too. i think it is not that it has all the sudden become ungovernable. i think the situation has become more complex. i also think -- i respect donna and i think she did a great job with dhhs. i think she and other chancellors have been able to do things at universities. it is just different with a ceo. you do not have authority and power the same way you do in corporations come up or in some ways government. there are ways to get things done. having said all that, these are the tough jobs and these are the tough times and the combination makes it harder than it has been. >> [indiscernible] do you think that another president at another public university would feel free to suggest an entirely different funding model? or do you think you better stay away? >> well, i'll just compare it again with a corporation. if you look at ceo's, and you think about changing their business plan in very sizable ways, that is a very big deal, a very difficult task. it involves the relationships with boards and so forth. it is tough being a ceo in difficult times. mark went to wisconsin ahead of you. when you make those big moves, you sometimes get caught up. mark had the support of the governor, and then apparently the governor could not deliver. i do not mean to minimize this. because i think it is hard to be a president. and it is all consuming in ways i have never found in any of your job, and government or private sector. -- in any other job, and government or private sector. there are some serious problems. i just do not want to overstate it has been a crisis that all the sudden come upon us. >> [indiscernible] is being the ceo of a corporation different from being at large research universities? >> absolutely. let me deal on a couple different levels. will illustrate some method behind the madness. different states have different cultures for how they deal with higher education. you have some states like california which has been the premier example planning for the last 50 years. the state university of new york, you know. it pulls together a lot of different philosophies. then you have michigan. and michigan, since the frontier days, has selected anarchy. what that means is each of the 15 public campuses and in the state have constitutional autonomy. we have no umbrella organization, and a shield -- no shield. -- no ceo. the philosophy has allowed the university of michigan to develop with one of the los all -- one of the finest institutions with the lowest levels of support. actually, no support at all for education until the late 19th century. they spent all the money but -- that came from selling land and kept it. the university of michigan has learned from that. and consciously over the last several decades has redesigned itself. to be an adaptive system. through a variety of steps, pushing the cold -- the control of resources, the responsibility down to the lowest possible level. that created an organization that was an extraordinarily adapted to change and which at the helm, there's very little concern at all. -- little control at all. in fact, the steering wheel was not even connected to anything. that protected it to some degree against mismanagement and misgovernance from the governing board. and it placed it in the hands of the deans. the university of michigan lists and dies by that. if we get good deans, they do extraordinary things. if we get bad ones, then we make a change, ok? more and more of the large public universities are following this pattern of pushing downward in the university control of resources, because that is where it is generated. at the university of michigan, we are very much a public university. but the public we serve and the public that supports us have very little to do with michigan. only four% of our budget is paid by taxpayers. but we seem to have adapted to that very well. so, think perhaps of the future of these public research universities. they are loosely coupled, but highly adaptive. >> [indiscernible] what would it take to make the university of vermontand other ones more easily governable? is this a model that you see? >> well, we are not quite so loosely linked as the university of michigan. but there has historically been a great deal of centripetal force at our university -- centrifugal force rather, that has placed a lot of power in the hands of deans and the college and school. i want to speak to the question, tamar. these are hard jobs. i think i agree with peter and jim that they are quite different from being ceo's of corporation's. they do have a baffling amount of complexity. i do say there is great joy in doing that. i'm sure that thomas sullivan had great joy in assuming the uvm residency. i hope it equals the joy i had in the job, which was very great. but it can take a lot out of you. it is in part because of the nature of the organization, the multiplicity of constituencies that need to be addressed, and the fact that it is -- even in places with more centralized control. we have a lot more centralized control and louisiana state than at uvm where i was provost for five years. even without that centralized control, there is an opportunity to be very creative and effects of lot of very significant change. and you can win in times of constraint. -- particularly in times of constraint, one is forced to be creative. you come to recognize that there are urgent needs for innovation and change. i think one question we ought to ask any university presidents in the public setting exuding -- exiting the office, some precipitously objected, and -- ejected and other slowly dying from the death of 1000 cuts -- we talk a little bit about the kinds of characteristics that make for people who are going to be very effective in serving the missions of our great public research universities. i can suggest a few. it always helped me to remember there are a lot of people on campus are much smarter than i was. i think there is some humility to be brought to bear when your community represents a continuous renaissance of research and teaching across a broad range of disciplines. a lot of flexibility, sense of humor. you need to be an extrovert. you need to -- as i did before every board meeting -- pick up the phone and spend time on the phone with each of our 24 board members. i do think one of our topics yes today is as critical structural -- we talked about yesterday is the structural component, and that is the structure and composition of the public university governing boards and how that affects the relationship between the president or chancellor and the board and especially the board share -- the board chair. in the discussion yesterday, the really challenging problem of having more chairs turnover rapidly. it is hard to build a stable long-term relationship where the board becomes a real partner in problem solving with the president and the rest of the administration. but i think there are great opportunities, and we need to encourage our talented colleagues to think about shouldering this burden of responsibility and joy. >> [indiscernible] >> let me start by saying, i was in the process of interviewing for provost for several universities. frank was encouraging. then i went to speak to my mentor bill bowen, and he said the happiest day of my life was when i left the presidency of princeton. for the first time i could worry about what was best for the nation and not my one o institution. so, please do not give it up. he said, sure. so, i was very happy. but i tremendously admire people in leadership positions at public universities, because of the important work they are doing in extraordinarily difficult times. the governance thing is really, really difficult. i have watched with admiration how nancy has behaved in new york state. you come into a state where all the trustees are appointed by the governor, the governor switches political parties. the trustees may stick around for awhile, but people in leadership positions do not want to be backbenchers. the board turns over very quickly. nancy has now served for three different governors. 1 governor had no relationship whatsoever with the legislature. the chances anything would happen there would be difficult. in new york state, it is not only a problem of the appointment of the board, but it controls everything. we have the freedom to set tuition, but not unless the -- but not the freedom to spend tuition unless the legislature appropriates it. we have a 64-campus system with research universities, public comprehensives, 2-year colleges, a maritime academy. and we have a system in which the legislature believes that tuition should be low and there should be no differential tuition on the campus of the great research universities. it puts them at a tremendous disadvantage. but i have sort of what could-- watched with admiration now as this leader has done really, really important things. one thing that we do is appoint presidents for each of the campuses. when nancy does not like a set of finalists, she will search longer. i think the campus goes crazy, but we will not hire just because we have an in t-line. -- an empty line. and given the crucial importance of the president, that is a very important thing to do. i have watched one problem with our board, of course, that people feel very attached to a particular institution that they came from. and i have watched the representatives from two institutions argue that these two institutions should be treated differently in the budget allocation formulas and -- than the other universities. and they are saying no. we do not want to define distinctions across institutions. we want all institutions to have the opportunity to grow. i think it goes to a more basic point of should you allow the flagship universities to break off from the rest of the system? if you allow that,this creates a competition for resources, which clearly is unhealthy. the whole higher education system lobbing together can be more effective. -- lobbying together can be more effective. our legislation does not believe in differential tuition. she got it. she did not call it differential tuition. she called it a research university fee, but in return for the fee, you have to say what you're going to do with the money. and it involves hiring more faculty, allowing the university to grow. and finally, she discussed with the governor capital matching in addition to the appropriations capital, basically to build the enterprise. but of course capital expenditures mean jobs, and anyone who has left a public -- has led a public university knows it is easier to get money for buildings than for bureaucracy. -- operating expenses. i wish we could move to a mixed system, like they have and in vermont, where they have public and private trustees. i wish we had a system more the -- where the needs of the institution were taken into account -- where the needs of the institution were taken into account. we can explain these things at the chancellor and the chairman of the board explain to the governor. maybe we can get a more informed -- maybe we can get reform in the process. >> does the system make sense? is it a good model? >> yes and no. this is a model. is it a good model? i think i agree with most of what has been said on this panel, including -- i will just comment that we are evolving toward a different type of system. with technology the way it is, the flow of students across institutions the way they are, with money, there are all kinds of reasons. there are administrative units that are not connected to one another. it makes no sense. to the extent that systems are a pure metal hierarchy of regulation -- pyramidal hierarchy of regulation, they are dysfunctional and they are not working. i think the system is evolving very rapidly away from being bureaucracies to being much more confederations and focused on quite different things than they were when they were first established. in the old days, they were there to get money from the state and pass it out and not have to answer any questions. i worked in the california system and i know what i am talking about. but it is a good system. i did not mean to be pejorative. they new what they were doing. the system was quite strong. what the public needs from the system is very different now than it was years ago. now than it was 30 years ago. i think we still need to have systems. my greatest concerns in public higher education has said do with the erosion with historic far walls between government and institutions oover economic policy. there are also its of things that are happening that are necessarily bad that people care about academic policy in the way that they did not. the reality is that we have the business of who gets the higher education, who is submitted, what they are taught, what accounts for a curriculum, what counts for credit and the bbq ming increasing -- and are becoming increasingly what it is necessary for public education. the fire wall system between the public and the institution with particular attention to decentralization of fiscal decision making where possible, transparency in all matters about how work is done, but with essential respect for the delegated rules world -- for the delegated the role of faculty, we need to be able to build systems that can do that job. it has always been messy and it has never worked all that perfectly, whether we're talking about internal governments, faculty governance or legislators. i remember my president, he was one of the great public university presidents and he fell to politics. it happened to the best of them then it happens to them now. this is now the people's business. what we have to be paying attention to know that we have not in the past is not just how the institution is managed and how -- and what is good for the institution but the connection of the institution and what the public needs for it. that means much more attention to student flow across institutions. we cannot have a great public research universities if our public schools are failing. it does not work. we cannot have a great research if we are not getting people from community colleges into our institution. the connectedness question is much more important then i think it was 30 years ago. and that requires different tempos, a different focus, and a different focus. >> going from there, talking little bit about affordability financially. this is my third higher education gathering. at all of them, the higher and people are saying, really, we are affordable, this is not a crisis. the media blowing it up with these unrepresentative stories about people who owe $100,000. they are creating a perception. i hear that, but i also know that there is something very not good going on there. during the housing crisis, it was probably 3% of houses that got close, but nobody would say there was no housing crisis. i also know that whenever we are right affordability stories, there is this populist outrage. it is a little bit like when i covered abortion. it is that hot because it is so close to the american dream and is this now just getting reserved a for the elite. as we looked at it in a journalism lands, it has seemed to us, and this will probably offend most of you, but to be higher at to touche -- the higher education institutions have not covered themselves in glory. the enrollment and a financial aid of people are not being very strict because they want to enroll people with what the costs are really going to be and what the alternatives might be of coming to their wonderful places. what it means to take out a loan and how much is reasonable for a person to borrow. it is true that this is a matter of public choice, really. people have the right to make the choices they want. but i want to hear from you all whether there is more you think the university should be doing without stepping on people's right to send their kids to whatever school they think their kids should go to. is there more you all could and should be doing to help guide those choices and make it less about enrolling everybody in your institution? anybody who wants to talk should. >> i think a lot of the public outrage is what is happening in private higher education, not public. >> not entirely. >> people do not understand that private and public higher education are not associated with increase spending but our associate with reduction in state supporters. having said that, and since this is a conference on public universities, we have an obligation to be efficient stewards with the resources that we do get from the states. that means there are all sorts of efforts to try to make sure that the money is promoted primarily to the key academic organizations to reduce our administrative costs. there are a number of large universities that very publicly have done that and our consulting. we have to figure out ways to increase and we reduced the cost of our instructional activities without reducing the quality. my own research basically shows that as the shared faculty of an institution -- six years graduation's go down. we cannot do it just by substituting lower priced the people. we have to find ways to improve learning. this is where technology is going to come in. a lot of people can talk more technically than i can about the role of new technologies and an improving education and reducing course. you hear the things as such of the open learning initiative periods -- open learning initiatives. and we have to figure out ways of sharing academic resources more across campuses in a system. but also across institutions which are our competitors. every institution cannot afford -- we cannot all cover it. how do we enrich our curriculum? and then, finally, there is the whole issue which you raised this question -- will there eventually be one or two major research university powerhouses that will develop introductory courses? will other institutions buy and then reduce their costs to the universities to help them do the things that they do. >> i definitely want to get back to other ways to do those first two years. i also want to go back to the question of a financial aid and what the universities do. we all know that the reason the public tuitions are going up so fast as the lower stage of appropriations. the public knows that the public universities used to be cheap and they're now going up much faster than private. >> it is not an amount. >> but the private system is still expensive. it will catch up. >> [indiscernible] >> that is wrong. >> the gap in dollar terms is frightening. >> it used to be so cheap to go to public university that nobody even thought about this whole thing. was fined. it was so cheap. in the gaming status, publics are still going up very fast. i just want to hear -- there is nobody here who would say that the public has not done everything they could to help people understand the cost. it is not cheap to go to public university. >> but it is still -- the principal cost continues to be the cost of living, not the cost of paying for instructions. it is just the opposite of private institutions or that costa several times the cost of living. i think part of the public perception -- misconception falls on people who set the bar by sang the more you spend, the better off you are. whether it is the michigan football team -- whatever. but the reality you were just told is that it is almost as cheap today in terms of instructional costs and spending as it was 20 years ago. ok? >> and community colleges, you could say they are even cheaper. so, none of you think that any public research universities that you have done anything with has done anything that wasn't wonderful -- >> that is a distortion. we are not saying that in the least. what we are saying is you have to get the facts right first before you unleash the barack. -- unleashed the barrage. >> one is not always comfortable that one is doing everything in a way that will leave one with the wistful sleep of a newborn baby. particularly, in a situation like ours where we are maintaining access and affordability very aggressively through a very successful high tuition, high strategy for our vermont residents. but we are 75%, 76% of our students are coming from out- of-state. it is possible to place critical pressure on the question of the balance of merit and so on for that large population of non resident students who become an institution as we are an institution and served many students from other states and wonder if we have that balance quite right. i will say that we do our best in good faith. to strike that balance, knowing there are moral complexities and policy complexities to the issue. i do want to reinforce what jim just said. our educational costs from a 25-year period from the mid 1980's have gone up 0.4% one year on a compound annual basis. there are very few enterprises that have contained costs that well. i also agree with ron. we have to do everything we can, not only to manage costs extremely affectively as the report from the national academies calls upon us to do, but also to make sure that the outcomes for our students are as good as they can be. the value proposition has to be at the center of the call so we are steering toward. >> let me try something here. i think that the flash point of public critique about higher education and rising tuition, no question about it, we have a very strong positive, still, for higher education. there is a huge vulnerability for concern about rising prices. there's a belief they are going up because we are paying attention to institutional advantage over student and over families. i do not think all of those perceptions are factually driven, but they are the very real. no matter how slice-and-dice the data, prices go up every year. virtually faster than everything else. we have to go with a much more straightforward way. distinctions between prices and costs, between tuition and fees, the games we play over tuition policy can contribute to confusion. i think we have a factual problem and a communication problem. it is not something we can't take her over. -- it's not something we can paper over. >> if someone were landing from mars and looking at our education system, this was an education editor who said this to me. they are all trying to get each other's out-of-state students because they pay more. that just drives up the cost of education for everybody and lets them take in more money. it is a frustrating to hear, again, we are doing it very well, we are doing it very cheaply, not so much about -- >> this is an unusual situation in the sense that they are not displacing any in-state students. the real problem occurs in states where there are underserved populations and increases dramatically. so is the issue of efforts to diversify the student body across international lines. the international students bring neat things to the institutions, but also, they bring more revenue. there are also affected by what we can do. i don't mean to keep bragging, but one of the things we are doing is that we are using the revenue, the extra revenue that we get to provide a funding so the low income students can study abroad. these are important public policy issues. >> we are very sensitive to the fact that we have held our education expenditures across the country at a steady flow and mostly increases of tuition are to take up for the drop in per capita students. -- per capita student appropriations. having said that, with public institutions and public purposes, and there is a perception that we have a problem. that we are not being as response driven. i think less of a perception today and some senses then when we had the cuts and people knew we had cuts. we want to have access. we want to have completion. half we feel deeply we have a public purpose. i think there is more we could do. i think the university of maryland system had an expansion. a lot of people think that is very interesting. i think we should worry about whether or not our students get jobs. there is a conversation about how we do that. public universities what public boards are struggling to respond to this. the public concerns and how to reduce costs. more than i have seen ever, in part, because of the recession. we do not want you to go away thinking you are being provocative, i know. thinking that we do not believe deeply in public feud -- public institutions responsibility to respond. we also make a point of making the difference between the privates. >> well, we do, but we also have to report that your percentage increases are much higher. >> why don't you put the actual dollar amount? you do not have the numbers. that is the point. if harvard increases at half the rate of a five times the amount. if that is put out there, who is going to say that harvard is increasing less than michigan. >> i know that we put to both of those. >> as one of the really -- we are very anxious that the public understands that when george washington university and has a $60,000 tuition that that really out fliers -- that should be the public. >> it is true, they are very different. i am sorry, go ahead. >> the other point i am trying to make is that these are public, but they're also state universities. they have public obligations to the states. they do maintain the lowest possible costs to students from outside of the state from whom they receive no money from california or from china. they are private institutions. their actual costs are much less than most other private institutions. you have to understand, and i think we tried to explain that we are really only truly publicly financed for our in net-state students and that is -- for our in-state students and that is where our priorities are. from out of state will provide you with the opportunity to attend, but we are a private institution to you folks. we will try to do our best. >> we need to think about where the u.s. didn't -- where the u.s. student -- we never had a conservative actor -- a concerted effort of a ranking system. the report does. -- the "us news" report does have an impact. it is almost entirely prestige and important. in its judgments as opposed to outcomes. we need to think more about how to deal with this problem. the public university has the system of accountability. but that is not everybody, of course. it's caught some way so we're trying to adjust its. but how to half in place-- but how to have in place incentives systems to focus on outputs is a big deal. during the brief period of time, i joined with the presidents at columbia and stanford. he understood exactly how distorted that rating system was. but then several days later the people told him how much that issue generated in terms of profits and if he wanted to stay its editor, he better leave it alone. >> here again, the role of the president comes in. he was very disturbed because the u.s. rankings were falling. day asked him to go out and drum up more applicants so the o go out andd him tp drum up more applicants so the universe would look more selective. he said to them, i'm not going to go to rural areas of wisconsin of the poorest schools where children have no chance of getting estimate -- into my institution and mislead them to read because he was able to educate the board on the social role of the institution and that was more important than prestige. even in private universities you have that problem. when he was first president of cornell, it seemed like the activity was going down to the competitors but there were getting better at a slower rate than competitors. his reply was, how selective you have to be to be a prestigious university? the next year when he saw the number of pell grant recipients fell, we went through a wall. he convinced the board it was important to do that during the worst education -- economic decline. the key role of the president in making clear to the board what fundamental objectives of the university should be. >> those are good stories. there is also the president of a well-recorded university in a -- a well-regarded university in a state going very fast so it cannot serve everybody whose contract gave him more money if he got into the top 10 public research universities on the world report. who is in the competition for more merit scholars from out of state. has an honor student college set mostly serves the out of staters. there are bad stories. those are the ones -- and similarly, on the west coast, when you have arizona and california and washington all competing because there is not enough space in states, is is really problematic. when i was out there on some version of this, there chinese students are out, i think 10%. there is more chinese students then from elsewhere in the united states. i was talking to their relatively-a new president and could they have a new system where the american students not from washington paid more than the in-state students, but substantially less in the foreign students. he said, there might be some support for that, because after all, we are getting a fair amount of national funding one way or another. but, of course, that are private to the out-of-state people. there is also a national obligation about how we are going to educate the most people most chiefly. -- most cheaply. >> my return to that for a moment. in the national academy report and recommendations there were making to committees, states, and businesses and universities, we rackham -- we recognized that the number one concern of the american public was the perception of costs were not being adequately controlled. and we believed very strongly that universities actually have to demonstrate through achievement that pathway to control. we essentially asked them to take the pledge for the next decade. they would hold the cost for ongoing activities. by the inflation rate, we did not mean the higher education which would mean for most institutions we are challenging them to trim 1%, 1.5%, of their budget. interestingly enough, even with several the late president's, we had unanimous support for that recommendation. my sense is that many of the public's are being forced to do that anyway. that will give an enormous in digestion to the richest of the privates because they compete by outspending people. it will rain some of that in. it will rein some of that in. but the other part of that that peter pointed out, we right now to not have the financial tools to strategically and manage our activity so we can achieve that. this challenge will force us not only to take steps, but to develop the capability to control those costs. >> the 500 universities released last tuesday contained a commitment that we would increase degrees by a certain amount as a group. it also said that we will constrain education. -- constrain education expenditures. and a lot of discussion as to whether we should have made that tied to inflation and how we should do it. some states for costs had been cut so deeply, it did not seem the appropriate thing to do. we have been able to keep, as a group, expansion for education flat for 20 years. we all know we are under huge pressure to keep it there. i think we will be able to contain these education -- the question you're asking is should we do more? i think we should do more. i believe some of the web education tools, i believe there is some money to save their. i think we to work on these things and, frankly, there is a bunch of data about ourselves. i would like to have job data to be out. >> we have not hit much on technology and i would love to hear questions on those and what people think. >> if we can, much of this conversation because of the nature of the audience, it is about public research universities. i just wanted to bring into the conversation the picture affecting state funding and tuition for comprehensive universities and community colleges who are, i think, even more dependent on state researches and universities. -- on state resources than research universities. a less able in light of budget cuts and historically received much lower appropriation levels for good reasons. nonetheless, they would kill to have your budget now. as we talk about where the problems are, and where we are either going to make or break this agenda, we will not be able to do it exclusively or predominantly. a state commitment to the access institution. i think the institutions have a public leadership role even if a critical leadership role even if it is not all to be done on their watch. >> from the university of vermont. while i have been at this conference, i have also been participating in the education of via the web. my job at the university is to handle the outreach. i am sort of a canary in a coal mine. i have more of a sense of urgency than possibly the rest of you. what i notice is have you heard about you? city? -- udacity? -- have you heard about udacity? universities will now contract with stamford to buy courses. i was just curious what you think that will mean for the future -- courses and degrees, and eventually. what that means for the rest of us? >> there's a lot of movement in that direction. are we in it 10 years of going to have our first two years? >> we are starting to see that already. >> gateway courses. >> let me comment on that. for monday and tuesday i chaired a major workshop bringing in the top people who were involved in this as well as a number of other leaders in this area. what i sense is, this is still very early with these massive online courses. the principal interest in them is not serving a huge number of people around the world are making money. or making money. the principal interest is as an experimental tool to understand how learning occurs because using so-called analytics, data mining, you are able to understand how students were taking certain types of materials are digesting and how they're performing. there is a lot of talk about is this simply a glorified textbook? ok. it is certainly not the kind of vegetation we would think of as a college education, meaning on campus with a working committees and the broader experience. but there are certain aspects of learning that occurs. there are other formats. this is an artificial intelligence base situation. if the cut and some other groups -- ithica and some other groups have done the gold standard groups on this and have found you can learn twice as deep, twice as fast in certain areas. this is deeply immersive gaming, once again, expanding very rapidly. the learning process is significantly different with these than what you see on college campuses. they're highly interactive where they learn more from students. it is stimulating a very deep understanding of modern science. enormous potential, but whether this is a college education are not is very much in doubt. >> i guess that is my question. i also noticed when i was listening to this, they are now going to ban it sort. they're going to look at who are the best students and contract with private industry and connect those students to the industry. >> i think what is, among other things, exciting is where it may lead to, but more practically and immediately, it is giving credibility -- credibility we probably should have had anyway. it was talked about yesterday. again, working with other stuff. what virginia tech is doing. teaching no calculus except through a self educated course and driving down costs and increasing a learning outcome. so much of the first year in college is the gateway courses. there is enormous opportunity, not just to reduce the cost, but also increase of learning. >> except for the fact that the first and second year of a college education is really designed to help kids grow up. i do not think you'll see the real impact of these courses in adult education. of course, that is where the explosion -- if it is estimated by the year 2013 there will be over half a million people enrolled in higher education and almost all will be adults. there will not be 18-22 year olds. >> i hope you are not right about that. i hope you're right about adult education, but i think we need to teach things like that first-year calculus in that way. that to biology, chemistry, physics, and some say more. if you can get higher learning outcomes out of a first-your calculus course, how do not do it. and what i love about the rest of it is that now you have stanford and mit and the rest of places you can think about the sorts of things. why shouldn't everybody else? even though the connection may not be -- absolutely. >> a real connection between udacity, is they are involving people who went to graduate school together in computer science at stanford. that is how these spinoffs occurred. these are very affective and being used to design things like advanced programming. we're now experimenting with putting out courses and social sciences and so forth. those are important experiments to run, but i think the big impact of this is that it stimulated some very serious and very strategic looking thematic departures from the classroom. >> i cannot name you a major public university that is not thinking about this. there probably are some, but i do not know them. these outcomes and the these costs questions are really quite compelling. if nothing else, the idea that we can get better learning outcomes and we know what they are. it isn't that you just have to be in calculus. it is said to know what concepts of calculus you have mastered. >> i know we would like to turn to the microphone and we will in one second. i just have to say, i agree with peter, but i also think we should not lose sight of what is special about getting an undergraduate education. we are talking about a particular kind of institution. if we can use the online learning initiative rich the feedback loop to an instructor in a hybrid course, that we are still bringing students into contact with the faculty and who they will become engaged with. one of my favorite conversations with a first-year undergraduate is what i said to her, what are you major in? and she said, and majoring in biology, but i am rising an -- but i am writing an article on a gene in colon cancer. the next time i saw her, i said, what happened to that? she said it was published. a first-year undergraduate and that does not happen if you are only online. you can become more proficient with improved learning outcomes with the online resources, but you want to have those students studying the sides of the masters in the university. >> i would say that i could not agree more. this higher ability, is going to force us to more clearly >> this availability -- this availability of higher education is going to forces to more clearly understand what you just said about this undergraduate experience. there has been a bundle of concepts that we sort of a field. how can we be sure we've got it. not everybody will be able to afford it, either. it certainly is part of going to the university of vermont. >> let's go to our questions. >> this is fascinating. i'm a little worry about changing the subject. i want to thank you everybody. as the narrow pleasure being here. -- it has been a real pleasure being here. i worked with a number of people. many of the people here have been our clients and tablets and searches of the past. listening to all the change that has taken place in higher education. if we're to except the suggestion that managing change is a short-term joppa, if we are -- a short term job, if we are also to listen to some of the characterizations of being a president as often thankless and or risky, i talked with the chancellor recently who said that you can only watch so many people go into the middle of the road and to stand there and get hit by the same bus over and over again and realized, i am not going to do that. i am grateful that dann said there is joy in these jobs and there is a reason to do it. it is is a very compelling commission. let's use another metaphor and tugboats and buses and roads. i am thinking of baseball. you have a pitcher who manages the game of to a certain point. those tend to be short-term positions. and then i am wondering what happens after that and higher education. what sort of leadership do we need post-change. where are those people now? where are they getting their training and mentoring. i venture to guess that none of you knew or could foresee the amount of change we are facing right now and probably did not train for this. that is my question. where are they going to come from and what sort of leaders to me. i think we are now -- -- where are they going to come from and what sort of leaders do we need? >> i think we're now part of much of the rest of the economy in the world for changes perpetual. i think they are wonderful jobs in some anyways, but they are -- i think they're wonderful jobs in so many ways, but they are very hard jobs. they need to have the intellectual, emotional capacity for perpetual struggle and change. >> i think the issue of identifying the next generation of leadership is a huge one. i worry about it in public and private institutions as a generality. i think we are over administered and under managed. i don't think we have a culture of thinking about the development of talent that long history is not respecting -- respect is the wrong word. we recruit people for the scholarship and fund-raising abilities. not necessarily because they know how to manage these institutions. but i think there is a lot of idealism on the academy. i think people see these jobs as an opportunity to do something important. they see them as an opportunity to make a difference. i think that is all true. we will likely to -- we will likely be to attract more talented people. -- i think will be very lucky and likely to attract more talented and entrepreneurial people. so they do not have to stumble into their own version of figuring out where their finances are. those kinds of things can be taught and more should be done on that. >> is is sort of interesting that it used to be the only way you got to be president of the research university is if you had already been a university president of another institution. what we are saying now is that there are some money vacancies and so much turnover that we are looking in different places and down in the pool. it is a very interesting example. i'm sure you're doing this in your practice, you're looking for people who have demonstrated ability and to think and grow in the job. jig your looking for people who have demonstrated ability and who you think can grow in the job. given the fact as we talked about this position, there now are many people who will jump and move from a dean at ship position almost directly into >> -- from a deanship position almost directly into the presidency. the real danger is that you need to have experience working with boards. if you do not have experience working with boards, you flame out quickly. i think that is what happened to jeff lehman at cornell. i think that universities have to mentor their new leaders. >> we need a board a boot camp. what do you think? >> not so much. >> you look at all the flame out. just about all of them are related to boards. >> there are issues about board president relationships and improving math. just the notion of doing things like making sure president goes to the harvard institute for making sure you are assigned a senior adviser. -- was often hired as a consultant when a new president came in. he would be a mentor the president could turn to. we have to worry about how do we support our presidents? don't just assume that he or she is ok. >> let me suggest a business line for you. as the chair of nomination and governance board, is for succession planning. you always have to be thinking, what is that ceo sitting at the end of the table gets hit by a truck an hour later? there are companies such as yours that are very experienced and how to launch a successful planning activity. how to it identify successful candidates from within the organization and duty to have that road map. -- and you need to have that road map. universities and to not pay much attention to that, but i think jaye universities do not pay much attention to that, but i think -- universities do not pay attention to that, but i think this is a new area of you folks need to move into. >> in a fortune 500 corp., if you do not have at least one or preferably a couple people who are possible candidates in case of an immediate need, the board generally thinks it is not doing its job. but but we here in vermont, you have this wonderful success and a wonderful outside person to be president. in a corporation, to have two outsiders come in and the president would be regarded as a board failure. and it doesn't. and yet, this is the way we uniformly to it. we do not have the status to be the president of great places unless we came from someplace else. if you're a chef, go to someplace else to be president. it doesn't make sense. it is based on an antiquated concept of what the role of a president is. i would think one of the best things we could do was begin to adopt the other sectors that you're supposed to have people trained and ready and then you can begin to have this in turn of people have a relationship with the board. >> let's try to take one and maybe two more questions. i would like to go back to the online learning question. assuming there are 50, 100 students per class, which generate significant tuition revenues of relative to the cost of the instructor. as higher-ed cannibalizes those courses. what are you going to use to supplement those courses on the higher end where i have very expensive professors who teach private students and where the cost per instruction hour or it'd to teach five students and where the cost -- who'd teach five students and where the cost hour or however our o you define it means that class is losing money every single time you teach it. i think that is something we're all very excited about technology, but it seems as though if i look at public and private institutions that you all are moving over a cliff financially where you are cannibalizing your main revenue streams in terms of instruction hours and going to outsource that. that will be wonderful in stamford and all these other mit -- in stanford and all these other mit places, though where is your next revenue stream coming from? >> we're going to charge for it. one of my colleagues who is the father of this technology describes the in competencies' of the university. the capacity to make significant learning communities. people do not learn as much as individuals. second, to provide access to knowledge and resources -- libraries, laboratories, groups. third, to essentially certify that this is close to truth and this is false and provide a piece of paper that testifies that you have learned something. these are the three competencies'. that is what people pay for. the way learning communities are formed, they are leaving the classroom. students learn more from one another than they do from the faculty. but now those groups may extend through to the world. that is changing. access to knowledge, in michigan, everything has been digitized. in a million books in the basin of the library and no one checks the matter anymore. that has changed. the fundamental role of assessing the learning that has occurred for that knowledge that is appropriate, that is changing as well. the functions are kind of the same. zones have hemans value. it will generate resources. >> i've a slightly different answer. i don't disagree with it. but my answer to your question is, good point. i think we haven't figured out the cost structures of the institutions. we haven't figured out what the right balance is on a lower division courses in particular. there is a lot that has to be sorted through. i think we are a long ways from being able to answer your question. >> it is a great question, but it is also true that institutions that are afraid of taking advantage of higher quality and low costs going fist forever. -- higher quality and lower exist forever. >> let's have a short question, i hope. i question about prestige and the ranking. it seems like there is a lot of agreements among the panelists that rankings are, shall we say, flawed, and not based on outcomes. and yet, universities widely promoted the fact that they gained standing in those rankings. sometimes, you use those as a goal. does that make anybody uncomfortable? because the center that lend credibility to such rankings? are we just talk with the fact or is there another approach? >> i think if you look at the web page of any university, what you will see on the web page is what ever -- whenever favorable publicity university is getting. i have done research that shows you can fall into the ranks of all sorts of bad things. it is more difficult to get the students to come. fewer people apply. you have to get more financial aid. tests scoring for students go down. the rankings and do matter. people say they do not pay attention to them, but that is that the only thing they are paying attention to. i think the message is that you can convey on your web pages and your written documentation what are the things that you are proud of and hopefully public research universities will deemphasized the rankings which have nothing to do with educational research anyway. >> i think there is no question that to end the institution, -- to the individual institution, there is a cost to not paying attention to the rankings. people do respond to incentives. we tried to say we are not going to, but they are there. i think that individual schools complained about these rankings have no impact on the u.s. world news report. they just say you are self- serving. and, of course, sometimes tunes -- sometimes the institution is. i think as a community, we either need to, together, either create our own option to effectively complain or go down with the media. this is such a societal problem. it is creating a misallocation of resources and we ought to call it for what it is. there is this -- there is some instinet -- there is some inconsistencies here that have gone too long. >> it is a great question. we always complain, we have not done anything about it. individual rates, you are -- individually, oyou are powerless, too and how, more broadly, this is done with the media pointing out to counter productivity of these rankings. >> thank you, all, panel. >> i want to thank everybody for having participated. we had a very rich group. it has changed from hour to hour. the participation has been wonderful. these are pressing, pressing issues for the well-being not only for our institutions, but i believe that as he so often says, universities like university of michigan have global reach and global constituencies and what happens to our great public research universities in america has consequences for the world at large, not just for the united states. i want to thank everyone for having deeply informed, really, model journalists who are saturated in our industry and have been able to challenge and provoke us and has, i think, and greatly enhanced the value of our proceedings. thank you for doing this for us and to all of the panelists and keynote speakers, too, a heartfelt thanks. thank you, everybody. for those of you dashing for the 1:00 hour flights, the shuttle bus should be outside the main entrance of the davis center. we will run it back around or i we will run it back around. sor >> join us tamara and the federal education policy. they are expected to talk about federal rules. our love coverage begins monday and o'clock a.m. eastern on c- span. >> what about if the soviet union announces that if we attack cuba it is gone into a nuclear war? >> we're going to be an easy. >> the happiest well qualified pi. -- they are all on alert. there are able to joke a little bit with each other, especially during this crisis. they think they have a sense of how lonely it is to occupy that office. you are getting advice. you're getting a lot of faulty advice. eisenhower on about faulty military advice. he was able to speak about the dangers as well as the advantages of military advice. he is a very useful ally. >> they have adapted to new digital technologies. it includes arnold schwarzenegger and executives from universal studios. this event marked the launch of the institute for state and global policy and is one hour and 10 minutes. [applause] >> thank you for turning up for this. it is an honor to be here. anyone who has been uncovering policy in new york kind of feels entertainment industry has this enormous power in politics and public policy, and also as a dark matter out there. we do not fully understand how it is affecting and changing what happens on the east coast. we have a remarkable panel of longtime leaders in that industry to help explain that to me and to you. one regret -- he apologizes for not being able to be here with us. he is working on the next "avatar" script. i will bring out the panel. the first person is arnold schwarzenegger. [applause] he is our host today. he is somebody who uniquely came from the entertainment industry and into politics. he is at the intersection of those things. he is extremely active in things like this. he will be starring in a new movie called "last call." the next person is ron meyer, president of universal since 1995. [applause] he is someone who has seen the industry whether the technological changes. prior to joining universal, he was the president of the creative artists industry, which he founded. i will keep is relatively short. the next is brian grazer, the chairman of imagine entertainment. [applause] and the guys behind shows like "24" and "a beautiful mind." there was a great profile about him. it said that he likes to make movies that are hits and wholesome. i love that. jimmy is the chairman of -- he has a lot going on. he is a producer for u2. there are headphones are a remarkable marketing story. you can catch it on your phone. he is also a mentor on "american idol." finally, rob friedman. come on up. [applause] he is the co-chair of lionsgate and producer of governors schwarzenegger's latest film. paramount merged with lionsgate and did the "twilight" series. without further ado, thank you for coming. we will get rolling. [applause] did i forget someone? the topic is innovation. filmmaking has change in the digital revolution. there are great talk down a stories -- top-down stories. when the media environment is being disrupted with kids with iphones and youtube, how do navigate that transformation? >> anyone who is buying our product, we are content providers. someone who is licensing and buying our products is a friend. the innovation works to our advantage. we get paid for it. [laughter] assuming we are getting paid and most yards unpaid for it, i think it is a friend and not a foe. >> you're successful in the music industry. i guess i wonder whether there are lessons that you learned that we will see playing out in film. >> what i found in 1999, the entire record industry was terrified of silicon valley. it was like a giant spaceship that landed on us. people getting music for free. i come from a music background. i will talk to one of these guys. it woke me up. i went to one of the founders of intel. i give them a 20 minute speech on how this is impacting the low salary people and the musicians investing in artist repertoire. he said that every industry is made to last forever. i got into the car. he asked, how did it go? i said, we are -- i realized at that moment that we had to do something to augment our business. we cannot as we for the technology industry to help us. it does taken a long time. business has been slow at dealing with this problem. the basic facts are, in 1999, we were act this amount of billions of dollars. we need to have subscriptions. >> i saw you nodding. i know people -- some will have never heard this language before. i will not repeat it. from the situation of the music industry? >> we were witnessing a car accident or a train wreck. we were on the verge of bringing our product to the dvd market. as an industry, we took a bit of a pause and to make sure that the protections that we needed for us to release our product to these new devices was at least as productive as we could make it up that time. that was always in counter intent to the hardware industry that did not want protection. it wanted it universally able to be downloaded and consumed. we waited a long time before we allowed our product to come out on dvd. piracy is a giant issue for us as an industry. we have implemented all sorts of activities to work at this on an ongoing basis. we learned from watching the music industry. >> in the end, do you feel that it was worth it? there were some people who were saying that the industry was moving slowly. >> i feel the same thing. 10 years ago, he created an alert as to what was going on in the music business and we would have the parallel things in the movie business. their piracy meetings. i was probably the only producer there. we could not do much. we disbanded our group and then i really do much about it. it is affecting us. >> that shift has played into politics. the money and power has shifted from los angeles to northern california, at least inside the democratic party. if you ran through it, you would see for the first time more technology executives down their work studio executives and a film executives. their interests were not always aligned. do you see the power shift affecting your industry? >> they certainly have a lot more money than we do. in short time, they have amassed a great fortune in silicon valley. piracy is a major issue. i think that we are all in one form or another looking for solutions to it. i do not feel affected by it. i think that there are a lot of pluses. there are advantages in marketing and communication with your audience. good and bad. there are a lot of advantages. we need to find a way to work together. we are not really competitive business. we need to find a symbiotic relationship. >> between the people who run the content and the platform -- >> we are in the content business. with new technology, it will be starved for content. we are seeing a different viewing habits on different devices based on age and experience. it is a symbiotic relationship. there are certain issues we do not have in common. >> one of the big industries is the abrupt rise of social media. that is kind of where i live a lot of the time. covering politics, you see these political campaigns competing as producers of content with people like me in the news that mess with folks like you in the entertainment business. we are competing for the same time. we're trying to produce a high- quality content. i guess i wonder and i am interested in how the shift toward me as such as facebook and twitter has affected the market and everything that you guys do. give me an example of that. >> well, i will try to addressed both questions. the plot from industry and silicon valley -- we are what differentiates them from each other. verizon and at&t, how do you pick a phone? technology companies such as apple and sony are culturally inept. they have twitter and facebook, but the content is provided by the consumer. the use it to generate content. you go and you watch them on their own. you have spotify and rhapsody. they are utilities, but they need culture. we have an enormous advantage. google, youtube, apple, amazon, microsoft. what happens? a lot of cranky people. we have to be smart about this right now. we need to build our own platform. we have what people watch. the content is by older users. other places need content. we need to know how to push it out. we cannot say that we will get 20 cents from youtube and 20 cents from apple and 20 cents from microsoft, but that is not a strategy. there is no reason why been the record industry does not until the user experience or online videos. 70 years of saying that somebody else does that. i resist trying to prove a marketing concept. people are advertising everywhere. hardware companies are intimidating. screw this. i'm going to make a piece of hardware and selling through the culture. i've got to make a piece of hardware as good as they do. they make all of their hardware in china. they're not creating. most of the technology is done in china. here is the new driver. here is the new driver. we build the best headphones in the world. we marketed it to the our culture that we grew up on and that we control. it worked. >> yes. do you think that would have been possible in an earlier media era? >> i'm one of the record guys that gets invited. somebody said, i'm sorry about your business. he was talking as if somebody's grandfa